More than a correction… it is the natural end
The stock market is going down and some say it is a correction, and that stocks will be back up in spring. Well, not so fast. There are concerns that the economy is genuinely slowing down. Here is a tweet from Edward Harrison…
Lower equities, lower oil, lower copper, lower bond yields, flattening yield curve says economic weakness, not just flight to quality
— Edward Harrison (@edwardnh) February 3, 2014
This is not a premature ending of the business cycle. This is the natural level of real GDP that corresponds to the new low level of labor share.
I have been saying that when real GDP hits around the $16.0 to $16.1 trillion point, that the effective demand limit would kick in and we would see utilization of labor and capital slow down. Well, real GDP is hitting that point now during 1st quarter 2014 after reaching $15.966 trillion in 4th quarter 2013.
We are witnessing more than a correction. This is “effectively” the end of the business cycle expansion, domestically and globally for the US. The data will progressively reveal more weakness through the 3rd quarter 2014.
Let’s hope so, for all our sakes in that it may finally wash out this era of crony capitalism and financial fakery along with globalization. Let’s hope so. The cheerleaders, shills, money changers, and liars praying for and worshipping their golden calf/god of infinite growth deserve more than a few nights of no sleep for the untold misery they have helped to create. The world needs to be brought back into balance, it’s literally exhausted and needs a rest. H. Kunstler just may be vindicated yet. The days of the new world temples called malls and their pharoes called CEOs and REITs need to go take a long walk into the desert.
Per capita real GDP is over $5,000 a year lower than a long-run trend, since 1960, in this deep depression. However, it’s higher than the 2007 peak. Also, much of the increase in GDP has been exports increasing faster than imports (reflected in the Keynesian consumption function, or identity, Y = C + I + G + NX). Chart:
http://www.advisorperspectives.com/dshort/charts/indicators/GDP-per-capita-overview.html?Real-GDP-per-capita-since-1960-log.gif
Monetary policy has benefited the top 20% of income earners much more than the other 80% through higher asset prices and lower interest rates. Also, older workers, with higher incomes, kept their jobs longer, and made it harder for younger workers to find jobs. Income inequality has increased.
Steve,
I beat a drum behind your words…